Jack in the Box to reposition, expand Qdoba

Jack in the Box reported a 7.5 percent increase in same-store sales for its Qdoba stores in the third quarter this year, and announced expansion plans that include 60 new stores, many of them with a brand-new look.
— Courtesy photo

Jack in the Box reported a 7.5 percent increase in same-store sales for its Qdoba stores in the third quarter this year, and announced expansion plans that include 60 new stores, many of them with a brand-new look.
/ Courtesy photo

Jack in the Box had a strong third quarter, beating estimates with a 2.4 percent increase in same-store sales, but the company's Qdoba division was the star, the company said in a call with investors Thursday.

The San Diego fast-food chain on Wednesday reported same-store sales rose 7.2 percent at company-owned Qdoba Mexican Grill restaurants, and 7.5 percent system-wide. It was the second consecutive quarter of sales growth in the 7 percent range for Qdoba outlets, which compete with fast-casual chains such as Chipotle and Panera. There is one Qdoba in San Diego, behind the security check in Terminal 2 of the San Diego International Airport.

Qdoba's continued progress in the third quarter was due in part to menu innovations and less discounting, said Jack in the Box CEO Leonard Comma in Thursday's earnings call. Fewer discounts meant average check size, which was $10.43 in 2013, continues to go up.

The number of transactions also grew 2.7 percent, twice as fast as they did in the second quarter, thanks to more repeat visits.

The recent sales increases herald new expansion and rebranding efforts as the company gears up to change the look of the restaurants and add new flavors on the menu, along the lines of its 3-Cheese Queso and Mango Salsa, that will help make it stand out from the competition.

In 2013, the company shared plans to sell off most of its Jack restaurants to franchisees while increasing its ownership of Qdoba. That year, it announced plans to close 67 of the lowest-performing Qdoba stores but promised more openings of the Mexican grill outlets in the near future. In the meantime, it put remodels at its estimated 600 remaining stores on hold until it had finished repositioning the brand.

The repositioning is nearly finished, said Chief Financial Officer Jerry Rebel, and Jack in the Box plans to open about 60 new Qdoba stores in 2015, roughly half of them company restaurants that will open later in the year with a fresh new design. The company's long-term plan is to operate 2,000 Qdoba restaurants nationwide.

Same-store sales are expected to increase approximately 5 percent to 6 percent at Qdoba company restaurants in the fourth quarter, compared with a 1.3 percent increase in the same quarter last year.